The Effect Of Managerial Overconfidence And Over-pessimism On Investment Decision In Listed Companies

Enterprise is an economic organization form to integrate social resources and whether it can obtain and maintain stable capital source to invest reasonably or not decides its sustainable development. The investment behavior has always been the research focus of economy, industrial organization and corporate finance. The China eleventh five-year plan puts forward to develop capital market to prompt the development of the enterprise healthily. However, the benign development of the capital market is related with the quality of the listed company. In real life, compared to the optical investment scale in the theoretical analysis, there is phenomenon of over-investment or under-investment for enterprise. The microscopic enterprise behavior will lead to the distortion of macroscopic. The traditional finance theory considers that the effectiveness of the resource allocation in capital market is decided by whether the managers allocate the enterprise resource under the standard of shareholder value maximization or not. However, it is hard to explain the abnormal market phenomenon and it challenges the classic MM theory. With the development of the behavioral finance, the western researchers combine the basic hypothesis and research method of the behavior finance with the behavior of the decision-maker to enhance the research of investment decision from the perspective of managerial behavior characteristics. Under the background of government-oriented emerging stock market in economic transformation period, how the managerial overconfidence and over-pessimism behavior affects the investment decisions and what is the difference in mechanism between emerging and mature capital market are urgent problems need to be solved.This paper makes an analysis about corporation performance prediction, and then this paper uses the outcome to measure the degree of the managerial overconfidence and over-pessimism, and makes an analysis about the distribution. Based on these measurements, this paper studies the relationship between managerial overconfidence and over-pessimism in Chinese listed companies and corporation investment decision through theoretical and empirical analysis. The consequences are as follows: the cash flow is positive to the enterprise investment expenditure; the degree of overconfidence has a positive effect on the investment expenditure-cash flow, and the degree of over-pessimism makes a negative effect on the investment expenditure-cash flow in China A-share listed companies. That is, when the net present value is negative, the overconfident manager will overestimate the profit and leads to over-investment; when the net present value is positive, the over-pessimistic manager will underestimate the profit and leads to underinvestment.